SAI Independence: A Founding Principle of INTOSAI

Henrik OtboChairman, INTOSAI Professional Standards Committee, and Auditor General
of Denmark

“Supreme Audit Institutions can accomplish their
tasks objectively and effectively only if they are independent of the audited
entity and are protected against outside influence.”

(The Lima Declaration, ISSAI 1)

I am honored to have been invited to write the editorial for this issue
of the Journal, which is dedicated to the theme of independence.

I decided to use the opening quote from the Lima Declaration to emphasize
the significance of SAI independence. According to the Lima Declaration,
independence is a prerequisite for SAIs performing their tasks; in this sense,
it is also a prerequisite for the INTOSAI Professional Standards Committee’s
(PSC) work with International Standards of Supreme Audit Institutions (ISSAI)
and INTOSAI Guidance on Good Governance (INTOSAI GOV). Consequently, as Chairman
of the PSC, I am very engaged in the subject of independence. INTOSAI’s
strategic plan also emphasizes the importance of SAI independence—the
overall objective of goal 1 is “to promote strong, independent and
multidisciplinary SAIs.”

The fundamental importance of independence was further recognized when
the 2007 International Congress of Supreme Audit Institutions (INCOSAI) approved
the Mexico Declaration on SAI Independence (ISSAI 10). Under the leadership
of the Canadian SAI, the PSC Subcommittee on SAI Independence worked out
eight principles that flow from the Lima Declaration and decisions made at
the XVII INCOSAI (in Seoul, Korea). These eight principles are considered
essential for proper public sector auditing:

The existence of an appropriate and effective constitutional/statutory/legal
framework and of de facto application provisions of this framework.

The independence of SAI heads and members (of collegial institutions),
including security of tenure and legal immunity in the normal discharge
of their duties.

A sufficiently broad mandate and full discretion in the discharge of
SAI functions.

Unrestricted access to information.

The right and obligation to report on the
SAI’s work.

The freedom to decide the content and timing of audit reports and to
publish and disseminate them.

The existence of effective follow-up mechanisms on SAI recommendations.

Financial and managerial/administrative autonomy and the availability
of appropriate human, material, and monetary resources.

Independence, however, is not just a question of SAIs citing ISSAI 10
and ISSAI 11 and declaring themselves independent. The issue of independence
is quite different from other SAI requirements in that it is determined by
factors external to the SAIs, such as the legal framework established for
the SAI’s work. SAIs are established to provide highly credible and
impartial auditing of public funds. This requires special guarantees to shield
them against improper political influence and ensure that the interests of
taxpayers and citizens remain in focus. This means that each individual country
has the responsibility to ensure that a framework for its SAI’s independence
is in place. However, at the same time, SAIs are under an obligation to call
attention to actions that jeopardize their independence. INTOSAI’s
current efforts to have the Lima and Mexico Declarations adopted as United
Nations resolutions represent an important step toward providing the best
possible basis for SAI independence.

Independence is not only a privilege—it also entails obligations and
should not be viewed separately from other SAI values, such as transparency,
accountability, ethics, and quality. ISSAI 10 should be viewed in connection
with the other level 2 ISSAIs—prerequisites for the functioning of
SAIs—in the framework of ISSAIs. A main objective under goal 1 of INTOSAI’s
strategic plan has, therefore, been to develop principles on SAI transparency
and accountability. I am pleased to report that this goal has now been achieved.
Under the strong and committed chairmanship of the SAI of France, ISSAI 20—Principles
of Transparency and Accountability—has been developed, and INTOSAI
members have commented on its nine following principles:

SAIs perform their duties under a legal framework that provides for
accountability and transparency.

SAIs make public their mandates, responsibilities, mission, and strategy.

SAIs adopt audit standards, processes, and methods that are objective
and transparent.

SAIs apply high standards of integrity and ethics for staff at all levels.

SAIs ensure that these accountability and transparency principles are
not compromised when they outsource their activities.

SAIs manage their operations economically, efficiently, effectively,
and in accordance with laws and regulations and report publicly on these
matters.

SAIs report publicly on the results of their audits and on their conclusions
regarding overall government activities.

SAIs communicate promptly and widely on their activities and audit results
through the media, Web sites, and other means.

SAIs make use of external and independent advice to enhance the quality
and credibility of their work.

Further prerequisites for the functioning of SAIs were established
by ISSAI 30—Code of Ethics—and especially ISSAI 40—Audit
Quality Control, which is currently being developed under the chairmanship
of the SAI of New Zealand. All these ISSAIs complement each other in relation
to the basic requirements that SAIs must meet to conduct objective and effective
audits.

That being said, we should not forget that the real test and importance
of independence lies in the conduct of our day-to-day work. I am sure that
all SAIs have at some point been under pressure from the media or other
parties. During the summer of 2009, the Danish SAI, Rigsrevisionen, was
at the receiving end of this pressure when the results of a major audit
were published. For the first time in its long history, Rigsrevisionen was
accused of “politicizing” its
work, and the media attacked our integrity, leading to pressure on our independence.

Despite the massive media pressure and the accusations that were made,
I am convinced that Rigsrevisionen’s good reputation has not suffered
for two reasons: the thorough audit work that we carry out in accordance
with international standards and the fact that the public perceives us as
a credible institution that lives up to high standards of transparency,
accountability, ethics, and quality control. The lesson to be learned is,
therefore, that the documentation and quality of our work and our objectives
and values require constant attention and development if we want to be in
a position to confidently rely on the quality and correctness of our audits
when we find ourselves at the heart of a media storm. In other words, focusing
on quality, ethics, and related matters will help us stand up to the pressure
from media and politicians that we all face now and then. In situations
like these, we have the strongest need for the ISSAIs.

I think that the recent Danish example illustrates quite clearly that
independence is not a static condition. It cannot be preserved without transparency,
accountability, and high standards of ethics and quality control. We have
to nurture independence, take a stand on it, and protect it. After all,
SAI independence is the prerequisite for being able to perform our tasks
objectively and effectively. In other words, independence is the foundation
of our work, and the stronger the foundation, the easier it is to build
upon it.

Special Focus on SAI Independence

At INTOSAI’s 58th Governing Board meeting—held in Vienna,
Austria, in November 2008— the board decided to globally communicate
the “role of SAI independence as embodied by the Lima and Mexico
Declarations” as a priority theme of INTOSAI for the year 2009.
This issue of the Journal focuses on SAI independence. In addition to
this editorial, see the article giving a case study of SAI independence
in Israel.

INTOSAI’s statements on independence are found in the following
International Standards of Supreme Audit Institutions (ISSAI):